Alt Text for the Image to be replaced by CMS text

Labour RSS Feed

Add to del.icio.us

Economic Policy (2005)

Introduction

Labour’s objective is to increase the sustainable rate of growth of the New Zealand economy, consistent with protecting environmental values and securing an equitable distribution of income and wealth, in order to improve the quality of life of all New Zealanders.

In terms of GDP per capita this means aiming over the long term to move back into the top half of the OECD while preserving our unique quality of life and strong sense of community.

Labour’s Achievements

In its first two terms Labour has made substantial progress towards its goals. Economic growth has been amongst the highest in the OECD, exceeding even Australia’s, and the gap between us and those above us in terms of economic rankings has closed.

Growth has been both balanced and inclusive, with all regions showing strong gains. A partnership approach has been taken with both business and the community involved in helping to lift productivity, exports and employment across the economy.

At the same time, Labour has maintained a strong fiscal stance, enabling us to build up the New Zealand Superannuation Fund, begin to boost substantially the incomes of low to middle income families, and invest considerable sums in health, education, and law and order.

New programmes have been put in place to support economic growth. This includes the Growth and Innovation Framework, the establishment of New Zealand Trade and Enterprise, greatly increased investment in infrastructure, and the strengthening and deepening of capital markets.

Labour’s Priorities

Over the next term of office Labour will build on the success achieved so far. In particular, the focus will be on maintaining strong fiscal and economic fundamentals, increasing savings and investment, lifting productivity, supporting growth and innovation, building international economic relationships, improving corporate governance, and promoting state sector reform.

Fiscal and Economic Fundamentals

Labour recognises that fiscal prudence and credibility is the cornerstone of our economic policy. Fiscal settings must be sustainable over the medium term.

Labour will:

Maintain a prudent and credible fiscal stance by running surpluses, on average, over the course of the business cycle that enable us to keep debt at low levels while covering our required contributions to the New Zealand Superannuation Fund;
Maintain a robust legal and institutional framework characterised by

predictability,
openness,
low compliance costs,
the rule of law;

Sustain the independence of the Reserve Bank and continue the current policy target agreement which mandates flexible inflation targeting;
Continue to improve New Zealand’s efficient broad-based low rate tax regime.

Savings and Investment

Savings are important to provide security for individuals and families, and to provide domestic capital flows for investment. However New Zealand has consistently had a relatively low savings rate and therefore a heavy reliance on overseas investment. This has contributed to one of the highest national debts in the developed world and persistent substantial current account deficits.

Labour will:

Maintain contributions to the New Zealand Superannuation Fund thus continuing the government’s role as a net saver;
Consider expanding the State Sector Retirement Savings Scheme;
Deepen capital availability by:

implementing the proposed changes to depreciation and venture capital taxation,
improving the tax treatment of financial intermediaries,
enhancing public confidence in the non-banking financial sector including consideration of extending the Reserve Bank’s prudential regulation role to that sector;

Implement the KiwSaver schme to encourage New Zealanders to save more by:

providing a $1000 kickstart for each KiwiSaver account,
subsidising the administration costs to maximise returns to savers.

We have set out to strengthen the role of individual New Zealanders in investment through the KiwiSaver scheme. Under this scheme, the government will support KiwiSavers through meeting the costs of the administration through IRD; through a $1,000 upfront contribution to each new KiwiSaver; and through a fee subsidy at a capped level to savers in approved KiwiSaver products.

Lifting productivity

To lift New Zealand's sustainable economic growth rate we must significantly increase productivity growth. To do so we need to continue high levels of labour participation and further increase labour productivity through increased levels of capital investment and better management and technological capability.

Labour will:

Implement the recommendations of the Productivity Working Group

building leadership and management capability,
encouraging innovation and use of technology,
investing in people and skills; networking and collaborating,
organising work; creating productive workplace cultures,
measuring what matters;

Monitor the impact of the new depreciation regime on productivity;
Promote infrastructure development including through:

infrastructure bonds,
public private partnerships;

Increase investment in skills development and industry training, while ensuring that the post-compulsory education sector meets Government priorities in terms of:

quality,
producing the skills we need,
industry training;

Continue to improve the ability of the Resource Management Act to deliver timely and effective outcomes consistent with sustainable development

Supporting Growth and Innovation

The Growth and Innovation Framework (GIF) has contributed to strong growth across all regions and sectors. We now need to take this to the next level by leveraging innovation in ICT, biotechnology and creative industries across other key sectors of the economy.

Labour will:

Leverage current sectoral strategies in the creative industries, ICT, and biotechnology by boosting their value as inputs across the economy;
Continue to promote effective sectoral strategies in key export industries such as food and beverage, forestry and fisheries;
Boost spending on research and development; monitor the effects of changes to the tax treatment of R&D, and work to improve the intellectual property performance of New Zealand firms;
Foster entrepreneurship and the commercialisation of innovation to improve the rate of private sector wealth creation;
Continue to build on our partnerships with unions and business to promote growth and productivity;
Consider the use of equity partnerships to promote growth;
Assist small businesses in particular by:

aligning provisional tax and GST payment dates and providing business with the ability to pay provisional tax on the basis of GST sales,
subsidising the use of payroll firms to carry out the taxation compliance work,
consider extending such subsidies to other compliance costs,
make available to participating businesses the results of Statistics New Zealand surveys,
implement key recommendations of the Small Business Advisory Group.

International Economic Relationships

Labour has a proud record of commitment to rules-based, fair trade. This must continue at multilateral, regional and bilateral levels. A deeper, stronger relationship with Australia will be the foundation of an enhanced network of deeper, more integrated economic relationships in our region. Enhancing our international connectedness also means maximising the returns to New Zealand firms of opportunities created by improved market access. Closer links between domestic and external trade strategy in an "NZ_Inc" approach will contribute to improved external balances and mitigate the risks of "hollowing out" as this liberalisation and integration occurs.

Labour will:

Pursue the objective of a single economic market with Australia while maintaining New Zealand's sovereignty and protecting our national interests;
Take a lead role in the Doha round negotiations, in particular to obtain a fair trading environment for agricultural exporting nations;
Promote other multilateral, regional and bilateral trade deals which:

Secure overall tangible benefit in New Zealand’s national interest,
Protect the government’s right to provide and regulate public services,
Promote the inclusion of labour and environmental standards in trade agreements;

Increase funding for New Zealand Trade and Enterprise to expand and diversify exports;
More closely integrate external trade strategy with domestic economic development by enhancing cooperation between NZTE, the Ministry of Economic Development and the Ministry of Foreign Affairs and Trade;
Monitor and evaluate the returns to New Zealand of closer economic partnerships and assist New Zealand firms to take full advantage of the opportunities they create;
Recognise the strategic challenges facing small economies and work to mitigate the risks of hollowing out, by:

Attracting and retaining high-value but mobile human, knowledge and financial capital in New Zealand,
Assisting sectors faced with transitional costs arising from trade deals to move to higher value, high quality production,
Provide specific assistance to assist businesses in the textiles, clothing, and footwear sectors to reequip in order to be able to compete, and
Strengthen the effectiveness of border enforcements of:

New Zealand standards (including labelling requirements),
Intellectual property and copyright, and
Anti-dumping rules.

This will ensure a fair competitive environment exists for New Zealand manufacturers.

Corporate Governance

Under Labour the reputation of New Zealand's corporate and financial sectors has been enhanced through appropriate co-regulation. Our equities markets have been broadened and deepened, providing New Zealand firms essential local access to capital investment. We must continue to build the reputation and integrity of New Zealand companies and markets by further strengthening corporate governance.

Labour will:

Monitor the implementation of the reforms it has made to the Takeovers Code, the powers and initiatives of the Securities Commission, the continuous disclosure regime, and the registration and review requirements for the stock exchange;
Introduce a new regulatory regime for insider trading, including prohibiting currently unregulated market manipulation and introduction of criminal penalties;
Ensure adequate resourcing for the state’s regulatory agencies;
Promote best practice standards of accounting and corporate governance.

State Sector Reform

Labour has always stood for strong state services available to all New Zealanders who need them. Improvements in technology and management now allow us to strive for new levels of client service, improved access to government and lower compliance costs. Modernising government by transforming the state sector means we can do more for our people within prudent fiscal constraints – essential if we are to continue to sustain the rising costs of health care, superannuation and education upon which the security and opportunity of all New Zealanders depend.

Labour will:

Maintain a strong public sector while ensuring that state sector structures and practices are flexible;
Modernise and improve the delivery of public services through:

Effective use of technology, through implementing the e-Government Strategy,
Focusing on clients and customising services where appropriate,
Managing for outcomes and enhancing performance measurement,
Developing leadership and capability in the public service,
Building a closer partnership with the community and voluntary sector;

Provide better value for money in the state sector by improving budgeting practices and regularly reviewing the effectiveness of existing spending lines;
Be a lead employer in terms of its employment practices;
Reaffirm its commitment to partnership processes, including the Partnership for Quality with the PSA.